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- Nestle is shutting down its direct-to-store delivery network for products like DiGiorno and Skinny Cow and will lay off 4,000 employees. (Bloomberg)
- Interest-only mortgages accounted for 77% of the loans backing $16.5 billion of new commercial mortgage-backed securities in the U.S. during the first quarter, , fueling fears of a return to crisis-era loose lending. (FT)
- Total U.S. consumer credit rose just $10.3 billion in March, missing all economist estimates, and consumer debt had its smallest increase in 9 months in March, suggesting Americans were less motivated to spend despite the strong labor market. (Bloomberg)
1 big thing: Australia is fighting to go 28 years without a recession
Australia hasn't had a recession in 27 years, but economists, market analysts and everyday Australians are starting to worry that things are taking a turn for the worse.
Driving the news: The Reserve Bank of Australia on Tuesday decided not to cut interest rates, which are already at the lowest level in the country's history, holding steady for the 30th meeting in a row. But many expect that it's only a matter of time.
- "The economy faces a lot of headwinds," Richard Franulovich, head of FX Strategy at Westpac, tells Axios.
Among the most pressing are a declining property market, weak consumer spending, depressed business sentiment and perhaps most pernicious, "the economy is just not generating enough inflation," Franulovich adds.
Details: The country's CPI in March fell to 1.3%, moving further away from the central bank's target of 2–3%. (Inflation hasn't hit 2% since June, which was just the second time since 2014.) Unemployment has picked up and remained stubbornly above 5%.
- The Australian dollar has been weak against the U.S. dollar and is trading near its lowest level since 2016.
What's next: The flurry of economic weakness has investors pricing in a rate cut by July, but the RBA on Tuesday pointed not to a typical 25- or even 50-basis-point cut but potentially taking rates all the way to 0.
- Bank of America analysts say its likely Australia will also get a jolt of fiscal stimulus from a new government no matter which party wins the May 18 general election.
The bottom line: Australia has benefited significantly from China's rise, as a major supplier of iron ore and other raw materials to the country. But China's import economy is clearly showing down, evidenced by data Wednesday showing Chinese imports fell for a fifth straight month.
- With the trade war between the U.S. and China again bubbling, Australia likely will need all the stimulus it can get.
Bonus: Fed vs. RBA since Australia's last recession
During Australia's 27-year recession-free run, its Reserve Bank of Australia has generally held rates higher than the U.S. Federal Reserve.
Fun fact: Australia is also the second richest nation on earth in terms of wealth per person at $411,060, right behind Switzerland, with 530,240, and ahead of the U.S. at just under $404,000, according to Credit Suisse's 2018 global wealth report.
2. Lyft's massive loss
Ride hailing company Lyft has performed about as poorly as a public company as it possibly could, and it continued that theme in its first financial report yesterday.
The numbers: Lyft posted a loss of $1.14 billion for the first quarter, more than its losses for all of 2018. It also reported a loss per share of $9.02, wildly outpacing losses of $1.81 a share predicted by economists.
- Lyft's stock is down by around 25% since its stock market debut.
In fairness, executives said the loss was driven by a $894 million charge for its stock-based compensation. Excluding that expense, the loss was $211.5 million. And the company’s revenue did rise 95% to $776 million.
- Lyft also got some good news from Alphabet’s self-driving car company Waymo, which announced a new partnership with Lyft Tuesday in a Medium post.
Meanwhile: The company's drivers announced a partial strike in conjunction with Uber drivers to begin Wednesday in protest of low wages and unfair treatment.
3. A bad version of "Groundhog Day"
Soybean prices yesterday fell to their lowest since July, when farmers saw the lowest prices since 2008. Prices have again nosedived after President Trump reignited the trade war with China, saying he would impose 25% tariffs on Chinese goods. China is expected to respond in kind.
- Soybeans had already seen significant stockpiling after last year's trade war flare-up and are now facing the spread of African swine flu and rainy weather across much of the U.S.
Farmers are getting hit on multiple fronts, Scott Irwin, an agricultural economist at the University of Illinois in Urbana-Champaign, told Bloomberg.
- It's "like a bad version of the movie 'Groundhog Day' for the U.S. farmer," he said.
4. 3-year Treasury auction lacks demand
Despite Tuesday's stock market rout and strong buying of safe-haven U.S. government bonds all year, a $38 billion auction of 3-year Treasury notes drew lackluster demand. Traders told Axios they aren't sure why.
- The U.S. Treasury Department auctioned the notes at the lowest yield for 3-year maturities since January 2018, Treasury data showed.
- The ratio of bids to the amount of notes sold was the lowest since January and indirect bidders took the lowest percentage of the total in more than 4 years, both signs of weak demand.
5. How the Fed thinks about climate change
Fed chair Jerome Powell told lawmakers the Fed is working to prepare financial institutions for severe weather events, even though climate is more broadly something "entrusted to other agencies," Axios' Ben Geman reports.
Why it matters: In the April 18 letter, made public yesterday, provides a closer look than Powell's previous public comments at how the Fed views the financial risks of extreme weather events that global warming is making more intense.
- Powell notes that climate change can "devastate" local economies, including banks, and "temporarily affect national economic output and employment."
Yes, but: The letter is more moderate than a recent report by officials at the San Francisco Fed, and the calls to action of major central banks.
- Bank of England Gov. Mark Carney is leading a coalition of 30 central banks advocating stronger action and better assessment of risks due to global warming known as the Network for Greening the Financial System.
- The Fed and Banco do Brasil were the only major central banks not to join the NGFS.
My thought bubble: Powell has been the perhaps the most political Fed chair ever. He's taken the view that the Fed is fighting for its survival, and a big part of that fight is avoiding public confrontation with Trump, who has staunchly opposed action on climate change, whenever possible.
What they're saying: Democratic Sen. Brian Schatz, who led a January inquiry to the Fed, the FDIC and the Office of the Comptroller of the Currency with 19 colleagues, attacked the agencies' responses via Twitter, calling them "garbage."
"[A]ccording to the Fed, severe weather isn't new and climate change isn't their responsibility," he said as part of a series of tweets. "The American agencies that oversee the financial system have decided to ignore climate change."
Go deeper: The Fed takes on climate change
Read more from Ben by signing up for Axios Generate.
6. Tuesday's selloff in context
The S&P 500 fell 1.7% on Tuesday, the Nasdaq dropped 2% and the Dow slumped 1.8%, with all 30 of its stocks moving lower. It was the worst day for the stock market since March, after President Trump's threat to increase tariffs on billions of dollars of imports from China.
- At one point some 89% of stocks on the NYSE were in the red, surpassing the number falling on Dec. 24, when the S&P fell to a 20-month low, Bloomberg reported.